Discss about the Market Environmental Analysis of Apple Inc.
The company selected for studying the Internal and External analysis is Apple Inc, the company has been selected because it is one of the valuable companies of the World today. Apple Inc. is an multinational company that has its headquarters in Cupertino, California, it designs, develops and sells Smart phones, tablets, computer softwares and online services. Some of the products of the company are iPad, iPphone, itunes, Apple watch, Apple TV. The consumer softwares of the company include, macOs, iOS. Steve Jobs and Ronald Wozniak are the founder of the company, it was founded in the year, 1976. In the year 1980 the company became public and instantly gained a success. The company is known for its ability to be innovative, the company has strict principles for Human rights, safety at works and waste management. The is also known for its strong ethics, non-disclosure agreement (Apple, 2017).
Apple is recognized for its operations with many suppliers all around the globe, it has a very efficient supply chain management. Apple fulfills all its commitments, the operations of Apple are carried out by 92,600 full time equivalent employees and additional 14,400 employees, most of the hardware products of the company are manufactured by outsourcing partners of the company, situated in Asia. Apple tries to reduce the cost of its inventory, a significant amount of marketing budget of the company is spent on Marketing communication mix, in advertising and public relations. Apple is well known for its excellent customer service. The sales assistant of Apple is are well trained and educated, they are very efficient in communicating the product specification and demonstration of product features. Customer service, post purchase service provides the customers an opportunity to upgrade their iPhone to newer versions by payment of some extra charges (Apple, 2017).
The internal capabilities of apple is very efficient, the company has skilled and efficient manpower that work day and night to make the company huge success. The advertising capabilities of Apple Inc provide the company to create awareness about its brand and in the public. The company has loyal customers that do not easily buy any other products. There is lot of product differentiation, the unique features of the smart phones offered by Apple has successfully created a huge customer base in the market as well as the industry. The company has very strong and extended distribution channel in US and in many countries in Europe, Australia and Asia. Apple Inc uses the direct distribution channel, which consists of third party cellular network carriers, AT&T, Verizon, Sprint, T-Mobile, Wholesalers, retailers like the Amazon, Walmart, Target, Staples and Value added resellers. The company manages four different operations as one, these operations involve, software business, hardware business, it is also a service provider and a retailer. The company efficiently controls the supply chain of its products. It is very difficult and none of the competitors of the company can manage the four areas of the supply chain as Apple does. In the year 2015, Apple was the most valuable brand in the world by Forbes and Interbrand. The brand was valued, US$ 145.3 billion, and it got the recognition to be one of the significantly growing brands. The brand is recognized and reputed in the world. The cash reserves of Apple are also one of the strengths of the company (Apple, 2017).
The cost of manufacturing is very high, the company uses modern technology for its manufacturing, cost is involved innovation, and company spends a lot of money on the Research and Development. The target of the company are people who are financially strong, because the price of the Apple iPhones are very high, the strategy of the company is skimming strategy and whenever the skimming strategy is used it targets a particular segment of the society, generally the rich, the company gets its sales from the regions where it has saturated. In the coming years the growth of apple will be because of the growth in the Smartphone industry, this is because of the competition is faces from the companies like Samsung and Sony Mobiles that offer the same features at comparatively lower prices. In some of the countries like India, where there is demand for the product but the direct distribution channel is very weak. One of the major weaknesses of the company is that the smart phones of Apple are incompatible to other operating systems (Xingang, Jiaoli & Bei, 2013).
The Internet of things market has a scope to grow in the future, health related wearable gadgets might be introduced to the market that will definitely attract the segment of the market that Apple targets. The expanding mobile payment market will help the customers in online transaction of the phones (Apple, 2017).
Strong competition from Microsoft, IBM, Samsung, Dell poses a threat to the company. The revenues of Apple is going is expected to decrease in other countries because has been estimated that the currency value of US dollar might get stronger. Lawsuits due to the patentent infringements bring bad reputation for the company (Apple, 2017).
Despite all the innovations and leadership status of Apple, somehow the company failed to stop the new entrants to enter the market and limit the substitute products, which are offered by companies like, Samsung, Dell and Sony at cheaper prices. The company faces a lot of competition from Samsung, Google, Microsoft and Dell because these companies have proved that the product specifications and the features of Apple can be imitated, these companies sell the same features in a comparatively lower price. In many countries Samsung is being sued for copying the iPad, moreover the company also have potential threat from other companies that are entering the industry or might enter the industry in the futures and offer innovative products, smart phones, tablets, computers and other smart gadgets. Microsoft shows modest growth in term of revenue, Google also shows steady growth, it is very difficult to say which of the companies posing more threat, Google, Microsoft Amazon or Samsung. All the companies are coming up with features that are either same or better at a cheaper price and hence those competitors target that segment of society that Apple fails to target because of its high prices (Akana et al., 2014).
Competitors Analysis of Company
The company pays higher corporate taxation because Apple has accumulated large amount of cash. The Company is very much dependent on low cost manufacturing in china. The company has chances to become a target of Nationalism and anti-Americanism movements in China. The close relations of Apple Inc with China can become a political issue in countries like Japan (Mudambi & Puck, 2016).
The stagnant middle-class incomes in many developed countries impacts the growth of sales of the company. Stronger US dollar will increase the exchange rates of the Company, which will make it very difficult for Apple to do business in Europe and China. The increase cost of labor in China might take away the cost advantage of some of the Apple’s products (Rothaermel, 2015).
There will be significant growth in the consumer expenditure in the regions of world, like Africa where the brand awareness of the company is very low. Consumers of the saturated markets, like America do not have strong attachment to the products of Apple that increase sales. The Ethical considerations about the manufacturing of Apple in countries like china might decrease the value of the product for ethically conscious customers. The music marketing strategy of Apple has disappointed people which led to public criticism resulting in tarnishing of brand image (Hollensen, 2015).
Google and Microsoft, which specializes in manufacturing of Laptops and personal computers, have showed that they have ability to duplicate the products of Apple. Google within a span of one year rolled out a Payment app, Android Pay that has the same capabilities. The growth in the usage of Smart Phones and tablets will decrease the demand for the Personal Computer of Apple. The operating system of Apple limits a number of applications, the consumer products like, Apple TV has a limited market (Grant, 2016).
Through Apple Pay, the company has recently entered highly regulated financial services sector, this will increase the level of regulation, Government and legal obligations. Apple is dependent of products that are covered by Intellectual property laws, this make the company vulnerable to piracy and litigation (Kim et al., 2015).
The major environmental issue faced by Apple is regarding the disposal of used and non working gadgets. These devices contain a lithium battery that is hazardous to the environment and is very expensive for disposal. Pollution and environmental concerns in china affects the manufacturing facilities in China, which will make the regulations strict (Cornelissen & Cornelissen, 2017).
Five years business environment projections of Apple Inc
Over the next five years, the market analysts estimate that the earning of the company might grow on an average rate of 7.85% per year. In the fifth year, the cost of the shares would be $12 per share. Over the past five years the P/E ratio of the company has increased from 10 to 18 by the end of 2021, it has been estimated that Apple stock will worth $170. Based on the assumption that there will be 8% growth in the next five years it has been estimated that the earnings per share will be $18 by the end of 2026, based on this P/E ratio the price of Apple will be $250. Long-term forecasts would be very inaccurate because of disruptive developments. If there is an arrival of new software and hardwares then there is a chance for sales growth.. (Washington post, 2017).
According to Washington posts, there are speculations that Apple is working on Project Titan, and Apple has invested $1 billion in the Chinese ride-hailing service Didi Chuxing in May, and as per Wall Street journal that self-driving Car project is on its way (Washington Post, 2017).
Product development is the main strategy of Apple, for product development the company offers attractive products to increase market share and market performance, the company implements intensive growth strategy through innovation in its Research and development. Apple believes Innovation is most important factor for success, therefore it focuses in innovation in Product development (Cornelisse & Cornelissen, 2017).
Apple uses Market skimming as its most important strategy, through its skimming strategy by targeting a particular segment of the society, the segment that is not price sensitive, is wealthy and buying behavior of such customers is highly motivated by the social status (Bull et al., 2016).
Apple also uses market penetration strategy for intensive growth, applies applies penetration strategies by selling more iPhones and iPads to its current market target, in its current market Apple gains more sales by adding more authorized sellers, this strategy has helped the company to gain the position it today holds. Advertisements encourage more people to choose Apple. The various websites and media outlets do the promotions of the products of the company (Chow, 2015).
Apple applies the Marketing development strategies mostly in the developing markets, the company innovates and offers new products like Apple watch, this way company develops itself in the smart watch market. This strategy agrees with the Apple’s generic strategy of differentiation (Area, Gonzalez & Mora, 2015).
The internal capabilities and the generic strategies of the company helps it be gain competitive advantage over other companies in the market. However, Apple faces many competitions and challenges while reaching out to its customers. The strong distribution channel within America helps the company to build a huge customer base, its national markets mostly contributes to the sales. The company’s most of the manufacturing is done in China, where company faces ethical and social threats. Apple is one of the most valuable companies in the world, the good will and strong global positions that the company has gained is because of the focus on excellence and product design.
The company needs few improvements to beat the competition that can be done by company by manufacturing cheaper phones, so that the company can target that segment of the society as well that it cannot target because of its high prices. The company cans start manufacturing facilities in other countries as well so that it becomes easier for the company to carry out it operations in case it faces some difficulties in countries like China. The company needs to be technologically more advanced so that competitors do not imitate its products.
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